Pacific Hydro has unveiled some bullish forecasts for the rollout of solar in Australia – both PV and solar thermal – although it says it is conditional on the manner of deployment of monies from the proposed $10 billion Clean Energy Finance Corp and on changes to regulatory rules for the electricity market.

Pacific Hydro development manager Terry Teoh told a seminar hosted by the 100 per cent Renewables campaign over the weekend that based on projects of long term costs of energy, there could be between 5-6GW of solar PV deployed in Australia between 2013 and 2023 – a mixture of rooftop PV, commercial and industrial applications, and utility scale solar farms.

He also said that 6-8GW of solar thermal could also be deployed in Australia between 2016 and 2026. Its widespread deployment would start later than PV because it has further to travel down the cost curve.

Pacific Hydro is Australia’s largest independent renewable energy developer, with an extensive porffolio of wind interests in Australia and overseas, a growing portfolio of geothermal prospects, and a growing interest in solar – it is one of the three members of the Moree Solar Farm that was shortlisted in the Solar Flagships program, but which is currently struggling to arrange finance.

Teoh’s predictions are broadly consistent with other private sector forecasts for solar, although they do contrast sharply with government forecasts.

Bloomberg New Energy Finance expects a total of between 5-6GW of solar by 2020 (including the 1.3GW that has already been constructed, with mostly PV and some solar thermal. Suntech Australia said late last year that there could be 10GW of solar PV in Australia by 2020, by which point it would be growing at 2GW per year. http://www.climatespectator.com.au/commentary/suntech-calls-australian-solar-boom

However, the federal Government’s draft energy White Paper suggested solar could play a minimal role, even by 2030, when it will provide 1.3 per cent at most of Australian energy mix, and including an extraordinary prediction that solar PV could cease to deployed once the renewable energy target comes to an end.

Teoh said later his predictions were based on several key conditions, mostly around policy. The first was that the CEFC was deployed in a manner which did not cannibalise the large scale renewable energy target, and didn’t replace private sector investment that would come forward anyway. This means that the CEFC should – at least in its initial years – focus on “enabling technologies” such as grid extensions and connections. “You can’t have one without the other,” he told RenewEconomy later.

The deployment would also depend on regulatory changes to Australia’s National Electricity Market, including connection rules. Teoh said he saw no impediment to having this much solar on the grid, as South Australia already had a wind penetration of greater than 20 per cent and could probably more to 25-30 per cent without much difficulty.

But what would be the impact of that amount of solar on Australia’s grid? The chances are that it could help dampen wholesale electricity prices, according to the latest study on the “merit order” effect from Germany.

Last week, we reported on the latest update of a Melbourne Energy Institute/BZE study on the merit order impact of solar PV in Australia, that found that 5GW of rooftop solar PV in the NEM could have depressed prices in the wholesale market by $1.2 billion in 2009 – or 12 per cent of the total market value – and $630 million in 2010 (the latter year is a smaller number because there was less price volatility due to milder weather conditions).

This conclusion was derived on modeling of how 5GW of solar PV might have impacted prices, but a new study released in Germany comes to surprisingly similar conclusions on solar PV that has already been deployed, and already had an impact on the market.

The study by Germany’s Institute for Future Energy Systems (IZES) analysed the impact of on the price of electricity by the deployment of solar PV in Germany – which at 25GW has installed more than any other country in the world – and it comes to similar conclusions than the Australian one.

The IZES survey found that solar power has reduced the price of electricity on the EPEX exchange by 10 per cent on average in the survey period – which ran from 2007 to 2011 – with reductions of up to 40 percent in the early afternoon when the most solar power is generated.

Uwe Leprich, research director at IZES, told the website Renewables International said the study found that the price of power was still rising considerably in 2007 between 10AM and 1PM as demand skyrocketed. But in the last two years, the sudden price increase no longer took place even though demand remained largely unchanged. “In addition, the differences between the base price and the peak price reduced considerably in 2010 and 2011,” he said.

“These are the two years in which the most photovoltaics was installed. At the same time, power demand did not change. We can therefore assume that photovoltaics is the reason why the base and the peak price have approached each other.” The base and peak prices used to be 20 to 25 percent apart, but that difference has shrunk to around 12 percent.

Leprich argues that this merit-order effect – which translates into an annual saving of 520 million to 840 million – has to be taken into account when discussing the cost of photovoltaics. “Of course, the effect is greater in the summer than in the winter, but it is there all year. After all, solar power is still generated in the winter – just not as much.”

IZES also comes to a similar conclusion to the Australian study, which suggested the extent of the savings gradually declines as more solar PV is installed. Leprich said solar PV will initially display more of the expensive power plants in Germany – such as peaking gas stations, two of which may face premature closure – and further deployment will increasingly cut into the inexpensive base load.

As an addendum to this, CleanTechnica reports that in the recent cold snap in Europe, Germany’s solar PV array has helped it export energy to France, whose nuclear-reliant grid has been unable to cope with increased demand, sending prices up by more than 50 per cent, and forcing the government to ask consumers to try and reduce consumption.

“Because France has so much nuclear power, the country has an inordinate number of electric heating systems. And because France has not added on enough additional capacity over the past decade, the country’s current nuclear plants are starting to have trouble meeting demand, especially when it gets very cold in the winter,” the website wrote, quoting Craig Morris of Renewables International.

Giles Parkinson is founder and editor of Renew Economy, and is also the founder of One Step Off The Grid and founder/editor of The Driven. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.

Giles Parkinson is founder and editor of Renew Economy, and is also the founder of One Step Off The Grid and founder/editor of The Driven. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.